European shares fall for 3rd day; M&A boosts telecoms

LONDON, Sept 9 (Reuters) - European shares slipped for a
third straight session on Tuesday, with companies that trade
dollar-denominated commodities such as oil taking a hit as
investors shortened the odds on an early hike in U.S. interest
rates.

Research from Federal Reserve economists published late on
Monday showed Fed members expect a higher trajectory for
interest rates than investors, boosting bond yields and sending
the dollar to a 14-month high against the euro.

The FTSEurofirst 300 index of European shares
closed 0.4 percent lower at 1,385.51 points, further retreating
from a 6-1/2-year high hit on Thursday, at the peak of a
four-week rally.

"As the bond markets all gently back up in yield, the
equities look round wondering where the prop was that they were
resting on," Andy Ash, head of sales at Monument Securities,
said.

"Certainly currency moves are still supporting the global
dollar carry trade: out of everything else into dollars. That
tends to not be good for lesser asset classes in 'everything
else' land while the dollar still strengthens."

Crude and other commodities which depend on economic growth
fell after the Fed's report, pushing shares in oil majors such
as Royal Dutch Shell , whose two listings fell
1 percent and 1.5 percent.

On the flip side, the diverging paths of the Fed and the
European Central Bank, which cut rates again last week,
pressured the euro, boosting the competitiveness of euro
zone exporters.

"The earnings momentum has been negative since 2011 and has
remained negative so far this year, and currency headwinds have
been partly responsible for that," said Ludovic Dufour,
portfolio manager at Mandarine Gestion in Paris.

"But given the speed at which the euro is falling now, we
may finally see the end of the forecast downgrades."

Analysts at Credit Suisse said they expected the euro's
weakness and further stimulus from the ECB to help demand for
European steel and upgraded ArcelorMittal to "outperform" from
"neutral".

Marco Fossati, an investor in the Italian firm, said last
week any offer for TIM Brasil should value the
Brazilian wireless company at around 11 times core earnings.

"It is expected that the offer will be generous," a
Milan-based analyst said, highlighting that Spain's Telefonica
recent offer for Brazilian broadband firm GVT valued
the group at 12 times core earnings.

French media company Vivendi picked Telefonica for
exclusive talks over the sale of GVT last month, spurning a
rival bid from Telecom Italia.

Europe bourses in 2014: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up
(Additional reporting by Atul Prakash in London and Blaise
Robinson in Paris; Editing by Hugh Lawson)